Bankrupt BlockFi Seeks to Explain $25M Executive Payments and Withdrawals
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Bankrupt BlockFi Seeks to Explain $25M Executive Payments and Withdrawals

Created 1yr ago, last updated 1yr ago

The crypto lending firm released a detailed timeline showing CEO Zac Prince's pulled millions out of the firm well before its financial troubles began.

Bankrupt BlockFi Seeks to Explain $25M Executive Payments and Withdrawals

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In a bankruptcy court hearing on Monday, crypto lender BlockFi went to some pains to make the case that senior executives — including CEO Zac Prince — did not drain their own funds in advance of filing Chapter 11 on Nov. 28.

With a full accounting of its financial condition due on Wednesday, BlockFi appears to be seeking to get ahead of questions about why Prince withdrew more than $9 million in April, and why the company appeared to pay him and four other executives $15 million in August.

BlockFi was initially rescued by a loan from FTX in June. That rescue collapsed, along with FTX, when Sam Bankman-Fried's crypto exchange empire was allegedly caught stealing some $10 billion in customers' funds.
In a presentation released on Twitter on Jan. 9, BlockFi provided a month-by-month account of nine executives' personal BlockFi accounts, pointing out that Prince's big withdrawal was made well before the early May collapse of LUNA and UST, which led to the domino effect that eventually forced the company into bankruptcy.

The document "provides all stakeholders with important historical background and context," it tweeted

BlockFi said much the same thing in court.

"I think the important takeaway here is that there was no situation where insiders were pulling money off the platform on the eve of or anywhere near this bankruptcy file," an attorney  representing BlockFi told the U.S. Bankruptcy Court for the District of New Jersey, CoinDesk reported. "So this is not the Celsius case where management extracted value on the eve of the file."

Revolving Door Payments

The presentation also noted in large, yellow-highlighted text that:

"No member of the BlockFi management team withdrew any cryptocurrency from BlockFi's platform after October 14, 2022, and no member of BlockFi's management team made a withdrawal greater than 0.2 BTC in value at any time after August 17, 2022."

In the first case, Prince withdrew the funds to pay state and federal taxes, the company said.

In the second, the presentation went into great detail of the timeline of a confidential lawsuit settlement in August that was structured so that the $15 million payment was "routed through the executives and ultimately made to the counterparty."

This included about $6 million from Prince, $4 million from co-founder and COO Flori Marquez, and $2 million from chief compliance officer David Spack.

Why BlockFi did not do is explain why the payments were made in that way, which created tax liabilities for the executives, which the company also paid.

Other data released included the losses suffered by more than a dozen executives, with Prince and Marquez between them losing more than $560 million after the FTX transaction that included a $400 million line of credit and the right for Sam Bankman-Fried's company to acquire BlockFi at bargain basement prices.

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